Persistence of Innovation: Stylised Facts and Panel Data Evidence

55 Pages Posted: 6 Dec 2005 Last revised: 20 Aug 2008

See all articles by Bettina Peters

Bettina Peters

Center for European Economic Research (ZEW)

Date Written: November 2005

Abstract

This paper investigates whether firms innovate persistently or discontinuously over time using an innovation panel data set on German manufacturing and service firms for the period 1994-2002. We find that innovation behaviour is permanent at the firm-level to a very large extent. Using a dynamic random effects discrete choice model and a new estimator recently proposed by Wooldrigde (2005), we further shed some light on the driving forces for this phenomenon. The econometric results confirm the hypothesis of true state dependence for manufacturing as well as for service sector firms. In addition to past innovation experience, the results further highlight the important role of knowledge provided by skilled employees and unobserved individual heterogeneity in explaining the persistence of innovation.

Keywords: innovation, persistence, state dependence, unobserved heterogeneity

JEL Classification: O31, C23, C25, L20

Suggested Citation

Peters, Bettina, Persistence of Innovation: Stylised Facts and Panel Data Evidence (November 2005). ZEW - Centre for European Economic Research Discussion Paper No. 05-081, Available at SSRN: https://ssrn.com/abstract=862144 or http://dx.doi.org/10.2139/ssrn.862144

Bettina Peters (Contact Author)

Center for European Economic Research (ZEW) ( email )

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